Field Office Cost_ Space Utilization_ Design_ and Usage

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					August 27, 2001
Evaluation Report No. 01-003


Field Office Cost, Space Utilization,
Design, and Usage
Federal Deposit Insurance Corporation                                                       Office of Audits
Washington, D.C. 20434                                                          Office of Inspector General




   DATE:                         August 27, 2001

   MEMORANDUM TO:                Chris Sale
                                 Deputy to the Chairman and Chief Financial Officer



   FROM:                         Russell A. Rau [Electronically produced version; original signed
                                 by Russell A. Rau]
                                 Assistant Inspector General

   SUBJECT:                      Field Office Cost, Space Utilization, Design, and Usage
                                 (EVAL-01-003)

   Our Corporate Evaluations Directorate has completed the subject review. We performed this
   evaluation to gather comprehensive information for management’s consideration and use when
   making future field office-related decisions.

   FDIC has improved most of its field offices to FDIC design guide standards. However, field
   office leases are constantly expiring and DOA plans to enter into new leases and complete a
   number of tenant improvement projects over the next several years. We expect the
   Corporation will find the results of this review helpful in planning and assessing the
   reasonableness of future leases and projects.

   On July 19, 2001, we provided a draft copy of this report to your office and to other relevant
   FDIC divisions. We received written and oral comments from the Division of Compliance and
   Consumer Affairs and the Division of Administration in early August 2001. We added
   clarifying statements to our report to reflect those comments where appropriate. Because this
   report does not contain recommendations, no further action from the Corporation is required.
Executive Summary

This report presents the results of our evaluation of            Field Office Space Design
the cost, space utilization, design, and usage of FDIC           In March 1999, FDIC agreed to provide dedicated
field offices. We performed this evaluation to gather            cubicles to all field examiners, an initiative called 1:1.
comprehensive information for management’s                       The space required to implement 1:1 accounted for
consideration and use when making future field office-           about 28 percent of the increase in leased space.
related decisions. To assist the reader with report              Other design features, such as training rooms,
terminology, we have included a Glossary as                      conference rooms, storage, and DIRM space
Appendix II.                                                     accounted for the balance of the increase. The
                                                                 Division of Administration (DOA) was updating the
Annual Field Office Costs                                        FDIC Facilities Design Guide concurrent with our
                                                                 review and was considering combining training and
FDIC field offices cost roughly $17.5 million annually.
                                                                 conference room space and reducing DIRM space.
Leasing costs and information technology (IT) costs
accounted for 67 and 20 percent of total FDIC field
office costs, respectively. We benchmarked selected              Field Office Usage Levels
costs against the Office of the Comptroller of the
                                                                 During 2000, field examiners spent a median of about
Currency (OCC) and other government and industry
                                                                 33 percent of their time in FDIC field offices. Division
facility averages. FDIC’s leasing costs were
                                                                 of Supervision (DOS) and Division of Compliance and
generally in line with OCC costs.
                                                                 Consumer Affairs (DCA) examiners spent 32 and 35
                                                                 percent of their time in field offices, respectively. We
FDIC IT equipment costs were higher than OCC’s.                  understand that in conjunction with the telework
The Division of Information Resources Management                 program, FDIC will begin monitoring field office usage
(DIRM) attributed this variance to FDIC’s ratio of               to determine future facilities needs.
examiners to workstations. Current IT costs for data
and voice circuits were similar to OCC costs.
However, full implementation of DIRM’s OneNet
                                                                 Telework
program could increase circuit costs by one-half.                In May 2001, FDIC offered task-based telework to all
                                                                 employees and home-based telework to a limited
                                                                 number of DCA field examiners. In addition to
Field Office Space Utilization                                   enhancing employee morale and work/life balance,
FDIC’s ratio of rentable square feet (rsf) to field office       FDIC established key results areas for evaluating
employees, known as the utilization rate (UR), was               program success, such as improving productivity and
higher than the URs of other government benchmarks               decreasing facilities cost.
that we reviewed. FDIC’s median UR was 306 rsf per
staff. Several FDIC field offices had URs near, or               DOS officials mentioned the team approach to
exceeding, 500 rsf per staff. FDIC’s median UR was               conducting examinations as the greatest challenge to
about 48 percent higher than OCC’s UR. We                        teleworking. DCA officials indicated their examination
estimated the value of FDIC leased space in excess               approach would be more suited to teleworking
of OCC’s median UR to be approximately $3.6 million              because many of DCA’s examination teams consist
annually.                                                        of one or two members.

Further, the amount of FDIC’s field office space
                                                                 We researched case studies at other agencies and
increased markedly over the past few years.
                                                                 private sector companies to determine what
Specifically, FDIC’s median UR increased by 146
                                                                 characteristics of telework programs enabled
percent under its current set of field office leases.
                                                                 reductions in facilities space. Although our research
FDIC officials indicated one reason for this increase
                                                                 was not fully conclusive, a common characteristic of
was because the amount of field office space was
                                                                 such telework programs was that teleworkers did not
probably not sufficient under prior leases, but
                                                                 have dedicated cubicles or offices.
acknowledged FDIC may have overcompensated in
improving and expanding field office space.
                                                             2
Table of Contents

                                                  Page
 Transmittal Memorandum                           1
 Executive Summary                                2
 Objectives, Scope, and Methodology               4
 Background: Field Office Structure               5
 Annual Field Office Costs                        6
  n   Leasing Costs                               7
  n   Improvement and Furniture Costs             8
  n   Information Technology Equipment Costs      9
  n   IT Circuit and Maintenance Costs            10
  n   Facilities Cost Metrics                     11
 Field Office Space Utilization                   12
  n   Individual Field Office Space Utilization   13
  n   Space Utilization Trends                    14
 Field Office Space Design                        15
  n   Training Rooms and Other Design Issues      16
 Field Office Usage Levels                        17
 Telework                                         18
 Corporation Comments                             19
 Appendix I: Map of FDIC Field Office Locations   20
 Appendix II: Glossary                            21




                                          3
Objectives, Scope, and Methodology

Our objectives were to evaluate:                             Scope and Methodology
 n   Non-personnel costs of FDIC field offices.              To meet our objectives, we performed the following
 n   Field office space utilization, design, and usage.      work:
 n   The impact of telework on field office decisions.         n   Interviewed HQ officials from DOA, DOS,
  n   FDIC field office facilities against other benchmark         DCA, DIRM, and the Division of Finance
      entities and identify best practices.                        (DOF). Interviewed regional officials from
                                                                   DOA, DOS, and DCA. Interviewed selected
                                                                   DOS and DCA FOSs, including
The Corporation had a number of related initiatives                representatives from the National FOS
underway concurrent with our evaluation. Specifically:             Council.

  n   DOS completed a process redesign study of its
                                                               n    Visited the Atlanta, Boston, Kansas City, and
      existing field structure and made
                                                                    San Francisco regional offices and toured
      recommendations for an appropriate structure for
                                                                    the Norcross, Boston South, Overland Park
      responding to changes in the banking industry
                                                                    East and West, and San Francisco field
      while maintaining cost-effective supervision.
                                                                    offices.

  n   DCA increased its managerial span of control and         n    Gathered and analyzed information about
      announced plans to reduce the number of Field                 individual field office leases, staffing, and
      Office Supervisors (FOS) through attrition.                   facilities space design.

  n   DOA contracted for a benchmarking review of              n    Gathered and analyzed comprehensive
      headquarters (HQ) and regional office space to                information about field office costs and cost
      assess facilities cost, utilization, and design. DOA          factors and drivers.
      was also updating its FDIC Facilities Design
      Guide.                                                   n    Analyzed Scheduling Hours and Reporting
                                                                    Package (SHARP) data to determine field
  n   DIRM was considering changes to its regional                  office usage and activities performed by DOS
      structure which would in turn affect the number of            and DCA examiners.
      Field Office Representatives (FORs) supporting
      field offices.                                           n    Reviewed FDIC’s proposed telework
                                                                    program. Researched other agencies’
  n   FDIC and the National Treasury Employees Union                experiences in telework.
      (NTEU) agreed to pilot task-based telework for all
      FDIC employees, and home-based telework for              n    Gathered field office information from the
      selected employees.                                           OCC, the Office of Thrift Supervision (OTS),
                                                                    and selected state banking agencies.

                                                               n    Researched other facilities benchmarking
                                                                    and best practices information sources.

                                                             We performed our field work from January to May
                                                             2001 according to the President’s Council on
                                                             Integrity and Efficiency’s Quality Standards for
                                                             Inspections.




                                                      4
Background: Field Office Structure

As shown in Table 1, FDIC has 91 field offices within         Table 1: Field Structure and Staffing
eight regions which support 2,242 DOS and DCA staff            Region      Field     DOS      DCA      Total
and 32 DIRM FORs. Of the total, 73 offices house                          Offices    Staff    Staff    Staff
both DOS and DCA examiners, 17 offices house only             Atlanta          15      227      47       274
DOS examiners, and one office houses only DCA                 Boston             5     148      33       181
examiners. Appendix I presents a map showing                  Chicago          14      273      64       337
FDIC field office locations.
                                                              Dallas             8     182      35       217
                                                              KC               18      325      70       395
Unless otherwise noted, for the purpose of this report:       Memphis          10      191      42       233
 n   Staffing calculations are based on Core VI               New York         11      196      42       238
     staffing, 2001 workload,                                 San Fran         10      327      40       367
  n   All cost amounts are for annual costs, and              Total            91    1,869     373     2,242
  n   URs are presented in rsf.


Other Benchmark Agencies                                    OCC headquarters and onsite examiners supervise
We also attempted to obtain facilities cost and             problem banks and large financial institutions,
utilization data from other federal banking agencies        respectively. Likewise, DOS’ recent process
and selected state banking agencies.                        redesign initiative characterized approximately 85
                                                            percent of FDIC’s supervised institutions as smaller,
                                                            well-rated community banks.
OCC
This report presents a number of benchmark                  OTS
comparisons to OCC field offices. Officials from DOS
                                                            OTS has 19 field offices for housing field
and DIRM questioned whether OCC was a good
                                                            examination staff. Each office houses 6 to 8
comparative agency because of differences between
                                                            examiners. However, most of the facility cost and
agency mission, workload, and structure.
                                                            utilization information that OTS provided was
                                                            summarized at the regional office level.
We acknowledge that there are differences between
the two agencies. However, in our opinion, OCC is
the agency most similar to FDIC. For example, OCC           FRB
has 69 field offices compared to FDIC’s 91 field            We contacted FRB OIG and determined that FRB
offices. About one-half of OCC’s field offices are          would not be a good comparison, and thus, not
located in cities where FDIC has a field office             helpful to our analysis. First, each FRB district
presence. Further, it appears that FDIC and OCC             operates autonomously. Second, FRB often houses
field offices serve the same sole purpose--to support       examination staff at facilities that perform other
examiners.                                                  functions, such as data processing centers.

Finally, although the OCC supervises fewer banks            State Banking Agencies
with greater assets than FDIC, OCC field offices are
                                                            Finally, at DOS’ request, we surveyed selected state
responsible for supervising smaller, well-rated
                                                            banking agencies to obtain facilities utilization and
national banks.
                                                            usage information. We also determined how
                                                            workstations are assigned to examiners.




                                                        5
Annual Field Office Costs

FDIC field offices cost roughly $17.5 million                      $1.14 million. This figure includes costs for
annually. This amount consists of: (1) operating                   improvements and furniture, fixtures, and
expenses such as lease costs and monthly                           equipment (FF&E).
recurring costs (MRC) for data and voice circuits
and (2) capital expenses such as building                      n   IT--Equipment -- $0.9 million. This amount
improvements and information technology (IT)                       includes an annualized depreciation amount
hardware. For analysis purposes, we annualized                     for IT hardware such as servers, routers,
capital expenses over a 5-year period to arrive at                 and telephone systems.
an annual expense amount.

                                                               n   IT -- Circuits and Maintenance -- $2.6
Figure 2 presents the composition of field office
                                                                   million. This amount includes MRC for data
costs by percentage. This report discusses in
                                                                   and voice circuits and maintenance charges.
more detail the following primary field office costs:
                                                                   As discussed later, this amount also
                                                                   assumes full implementation of DIRM’s
  n   Leasing costs -- $11.7 million. Most field                   OneNet program.
      offices have full service leases that include
      costs for utilities and taxes. Field office            We did not include personnel costs or costs for
      leases are generally for a term of 5 years.            personal computers, laptops, or other peripherals
                                                             such as printers, or telephone usage charges,
  n   Improvements -- $2.3 million. This is an               under the assumption that those expenses would
      estimate based on discussions with ACSB.               continue regardless of whether a field office was
      FDIC actually moved and improved 32 field              closed or consolidated. Further, we did not include
      offices during 2000 at an annualized cost of           costs of DIRM FORs who provide IT support to
                                                             field offices.



                        Figure 2: Annual Field Office Costs




                  IT-Circuits &
                  Maintenance                                                 Leasing
                      15%                                                      Costs
                                                                               67%
                             IT-Equipment
                                                        Improve-
                                 5%
                                                         ments
                                                          13%


                                                         6
Leasing Costs

Monthly leasing costs accounted for about 67                              We compared FDIC lease rates to OCC and OTS
percent of total field office expenses. With the                          lease rates. OCC generally signs 5-year leases
exception of the San Francisco field office, FDIC                         for Class A space, located within the CBD. We
leases space for all field office facilities.                             also compared FDIC rates to average
                                                                          commercial office real estate rates published by
FDIC’s field office leasing costs amount to about                         the Society of Industrial and Office Realtors
$11.7 million annually. Field office leases are                           (SIOR). Table 2 presents those comparisons for
generally for a term of 5 years and are all-                              selected cities.
inclusive of operating expenses, utilities, and
taxes. FDIC prefers to lease Class A space,                               We concluded that FDIC rates were generally
where available. FDIC is not required to lease                            below SIOR Class A averages. However, we
space within central business districts (CBD).                            were unable to draw conclusions regarding the
                                                                          comparability of the FDIC, OCC and OTS lease
                                                                          rates because several factors could influence
Field office leasing policies are delineated in
                                                                          them including: building class, term of the lease,
Circular 3540.1, FDIC Leasing Policy Manual
                                                                          whether the space was located within the CBD,
(LPM), dated December 22, 1999. The regional
                                                                          and the health of the leasing market when the
corporate services branch is responsible for
                                                                          terms were negotiated.
administering field office leases.



              Table 2: Benchmark Comparison of FDIC Rental Rates
                                                    SIOR CLASS A Averages
              City                 FDIC           OCC            OTS         CBD    Outside CBD
              Albuqerque           $13.50         $18.75                     $17.08      $17.29
              Boston               $28.65         $23.05         $26.05      $40.50      $31.20
              Charlotte            $18.35          23.86                     $25.00      $19.25
              Chicago              $22.52         $20.75         $22.40      $33.23      $26.00
              Dallas               $19.04         $21.48         $26.14      $23.07      $24.10
              Denver               $20.63         $17.42                     $22.84          N/A
              Fargo                $14.00         $11.48                     $13.50      $15.50
              Indianapolis         $15.06         $16.50         $15.52      $19.50      $19.50
              Jackson              $18.50         $26.75                     $19.00      $19.50
              Little Rock          $16.94         $12.05                     $13.10      $16.78
              Milwaukee            $15.90         $17.70         $15.38      $23.00      $21.00
              Minneapolis          $14.81         $23.35                     $30.00      $26.00
              Nashville            $19.00         $30.14         $15.00      $19.50      $17.00
              Omaha                $23.25         $20.14                     $19.00      $21.00
              Sioux City           $16.50         $15.62                     $15.00      $17.50
              Sioux Falls          $15.35         $19.91                     $14.50      $11.25
              Syracuse             $17.51         $18.44                     $15.00      $17.00
              Tampa                $16.35         $17.79         $21.76      $20.00      $22.00
                Note: The lowest rate for each city is shaded.




                                                                  7
Improvement and Furniture Costs

Tenant Improvements                                                                     HQ and Regional DOA staff to determine the
Tenant improvement (TI) projects may be managed by                                      total psf improvement costs including the TI
the landlord or by FDIC. The cost of an improvement                                     allowance and costs funded by FDIC. We
project may be factored into the lease rate as a TI                                     concluded FDIC’s improvement costs did not
allowance, paid by the FDIC as an improvement                                           exceed the reasonable range of $25-$40 psf,
project, or funded by a combination of the both. For                                    as shown below in Table 3 under the “PSF
each leasing decision, FDIC first procures a market                                     Improvement Cost” Column.
survey from its national real estate broker. Next, the
LPM requires the leasing specialist to complete a                               Furniture, Fixtures & Equipment
financial analysis of each proposal on a net present
                                                                                This category captures other, non-construction
value and nominal basis. The DOA Regional Manager
                                                                                expenses associated with improving field offices
then makes a best value decision based on
                                                                                and includes: FF&E, DIRM cabling, cubicles,
quantitative and qualitative factors.
                                                                                security systems, and moving expenses.

Because of the varied ways that improvements can be
                                                                                We were unable to obtain benchmark information
handled, and because lease rates do not specify
                                                                                for FF&E costs from OCC or other government
amounts attributable to a TI allowance, we were unable
                                                                                agencies. Table 3 presents improvement and
to benchmark improvement costs between agencies.
                                                                                FF&E cost information for the 10 improvement
However, we confirmed with a commercial real estate
                                                                                projects that we reviewed.
broker that $25-$40 psf was a reasonable range for
government tenant improvement projects.
                                                                                FDIC has improved all but nine of its field offices to
                                                                                the current design guide standards. However, a
To satisfy ourselves that FDIC’s leasehold
                                                                                number of leases will expire over the next few
improvement costs were reasonable, we:
                                                                                years. Leases involving new space will require
                                                                                tenant improvements. For example, during the
  n     Confirmed that FDIC performed a financial                               period 2002 through 2004, 53 leases are
        analysis for each case that we reviewed.                                scheduled to expire. We expect the information
                                                                                included in this report will be of assistance to DOA
  n     Selected a judgmental sample of 10 field offices                        in planning and assessing the reasonableness of
        that were improved during 2000 and worked with                          future leases and improvement projects.


  Table 3: Analysis of Selected Improvement Projects Completed during 2000
                                               Total         PSF         Total                                   PSF
                                    TI      Improvement Improvement FF&E                                        FF&E Total Cost
  Field Office Staff    RSF     Allowance       Cost         Cost        Costs                                  Costs   Per Staff
  Shelby          18      6,050    No TI         $229,916       $38.00 $132,056                                  $21.83   $20,110
  Creve Coeur     23      6,205 $10 PSF          $184,193       $29.68 $158,613                                  $25.56   $14,905
  Omaha           20      7,725 $7 PSF           $176,743       $22.88 $38,437                                    $4.98   $10,759
  Montgomery      17      7,798    No TI         $237,467       $30.45 $164,155                                  $21.05   $23,625
  Grand Island    17      4,896 39% of Cost      $137,919       $28.17 $72,461                                   $14.80   $12,375
  Nashville       24      8,660 $7 PSF           $139,807       $16.14 $171,551                                  $19.81   $12,973
  Lexington       19      7,659 $22 psf          $105,203       $13.74 $186,382                                  $24.34   $15,347
  Little Rock     26      9,603 $75,000          $109,591       $11.41 $189,418                                  $19.72   $11,500
  Billings        16      4,843    No TI          $73,719       $15.22 $99,664                                   $20.58   $10,836
  Gainesville     13      5,195 $27 PSF           $54,604       $10.51 $114,037                                  $21.95   $12,972
      Note: Total Improvement Cost equals the sum of the TI allowance and FDIC-funded construction and architecture costs.
      Source: Leasing files and discussions with leasing specialists.

                                                                        8
Information Technology Equipment Costs

Information technology (IT) equipment costs consist                                  Figure 3: FDIC IT Hardware Costs
of expenses for hardware to support data and voice
services. FDIC spends a median of $462 per field                               70
office staff annually for IT equipment. In comparison,                                         61
OCC’s median annual cost per staff was $251.                                   60
FDIC’s annual cost per staff for IT equipment was 84
percent higher than OCC’s annual cost per staff.                               50
Figures 3 and 4 present IT equipment per staff costs




                                                               Field Offices
for FDIC and OCC field offices. For example, Figure                            40
3 shows that 61 FDIC field offices have per staff IT
costs in the range of $300 to $600 annually.                                   30

                                                                               20     14
For the most part, IT equipment charges are fixed                                                       12
costs, not variable. Accordingly, smaller field offices                        10
have higher per staff IT costs. For example, the two                                                             0         1         2
offices in the “Over $1,500” range in Figure 3 only                              0
have 6 and 8 employees, respectively.                                                Under    $300-    $600-    $900-   $1,200-    Over
                                                                                      $300    $600     $900    $1,200   $1,500    $1,500
                                                                                                  Annual Per Staff Cost
Data Hardware
Data hardware accounted for the bulk of the field
office IT equipment costs and includes servers and                                   Figure 4: OCC IT Hardware Costs
routers physically located at the field office level.
FDIC’s median data hardware cost for a field office                            60
was $38,195. The servers cost about $14,500 each
and were installed in 1997. A DIRM representative                                      48
                                                                               50
told us the servers were never fully utilized and are
                                                                                                               OCC did not include data
currently used to spool print requests and to image                                                            for two field offices.
                                                                               40
                                                              Field Offices




laptops. DIRM plans to remove the servers and will
not be replacing them.
                                                                               30
OCC’s field office IT equipment costs were about
                                                                                                19
                                                                               20
$15,000 per field office. Approximately 25 percent of
OCC’s field offices do not have servers and instead
use high-speed lines, which may account for a portion                          10
of the per staff cost differences.
                                                                                 0
                                                                                      Under   $300-    $600-    $900-   $1,200-    Over
Voice Hardware                                                                        $300    $600     $900    $1,200   $1,500    $1,500

For voice equipment, DIRM indicated that it normally                                            Annual Per Staff Cost
budgets $150,000 annually for field office telephone
system purchases and upgrades and recommended
that we divide that amount evenly across FDIC’s field
                                                                               Voice hardware costs also include the cost of
offices for analysis purposes, yielding an average per
                                                                               individual phone units. According to a DIRM
staff cost of $67.
                                                                               representative, under OneNet, FDIC will purchase
                                                                               new voice over internet protocol (VoIP) phone units
OCC recently replaced phone systems in 70 percent                              for all field office staff at a cost of $400 per unit, or
of its field offices at an average cost of $10,095 per                         roughly $909,600 for FDIC’s field staff. Figure 4
office or an annualized cost of $126 per staff.                                does not include the costs for the VoIP telephones.


                                                          9
IT Circuit and Maintenance Costs

This category includes Monthly Recurring Cost for data                               Figure 5: IT Circuit Per Staff Costs
and voice circuits, maintenance, and dial tone service.              $1,400
As discussed earlier on page 6, we did not include costs             $1,200
associated with long distance usage charges.
                                                                     $1,000
Currently, FDIC’s median annual circuit and                                  $800
maintenance costs are within about 5 percent of OCC’s
costs. However, as shown in Figure 5, if FDIC fully                          $600
implements the OneNet program, FDIC’s annual
median cost could increase by as much as 52 percent,                         $400
from $800 per staff to $1,219 per staff.
                                                                             $200

                                                                              $0
OneNet Program
During our review, FDIC was soliciting bids for the                                         OCC
OneNet program. OneNet will consolidate FDIC’s two                                          FDIC Current
data and voice networks from a frame relay                                                  FDIC OneNet 5-yr Transition
environment to a single asynchronous transfer mode
                                                                                            FDIC OneNet Full Implementation
system (ATMS), a newer, more efficient technology.

OneNet will allow the Corporation to use VoIP phone                                  Figure 6: Projected Annual IT
service and will also support other initiatives including:                                Connectivity Costs
  n   Internet Protocol Television (IPTV)                                     $3.0

  n   the Memphis Imaging Project (Documentum), and
                                                                              $2.5
  n   Server consolidation at the regional and HQ level.

                                                                              $2.0
                                                                  Millions




In July 2000, we reported on DIRM’s request for
expenditure authority to support OneNet and discussed                         $1.5
the proposed increase in circuit cost, especially at the
field office level (EM-00-002, Request for Expenditure
                                                                              $1.0
Authority--OneNet Wide Area Network, dated July 26,
2000).
                                                                              $0.5

According to a DIRM representative, monthly rates for
                                                                              $0.0
OneNet have decreased significantly since 2000,                                      2000   2001    2002    2003   2004       2005
making OneNet more attractive economically. FDIC
                                                                                                   Data    Voice
awarded a contract to MCI in April 2001 to implement
OneNet. The Director, DIRM, stressed the                          We believe the decision to implement OneNet at the
implementation of OneNet at the field office level would          field office level should be viewed in the context of
be subject to approval during the annual budget                   how often, and for what activities, examiners will use
process.                                                          the service. As discussed later, examiners are in
                                                                  field offices, on average, about 33 percent of the
As shown in Figure 6, circuit costs will increase by 52           time. Examiners spend most of their time at
percent if OneNet is fully implemented. To put it in              financial institutions. While OneNet will increase
perspective, the annual median cost per field office for          bandwidth at the field office, it will not improve
IT circuits and maintenance will increase from $20,313            performance for examiners dialing into the network
to $33,035.                                                       from an institution or from their homes.


                                                             10
Facilities Cost Metrics

According to GSA’s Office of Governmentwide Policy,
two metrics are commonly used to evaluate facilities
costs--cost per employee and cost per square foot.
We are including these metrics to provide the
Corporation with a baseline for evaluating existing and
future field office costs.


Cost Per Square Foot
This metric is more appropriate for evaluating leasing
                                                                                       Figure 7: Cost Per Square Foot
cost and tenant improvement costs. We are                                                   (Lease, IT Expenses)
presenting two calculations of this metric:
                                                                                50
                                                                                                  44
  n   The first calculation is for all 91 field offices and                     40
      includes lease and IT expenses only. FDIC’s
      median cost per square foot was $22 considering
                                                                    Offices     30
      those expenses. Figure 7 presents cost per
      square foot information for FDIC field offices.                                    18                  19
                                                                                20

  n   The second calculation was for the 32 field
                                                                                10                                        6
      offices improved during 2000 and included lease,                                                                                            3
                                                                                                                                      1
      improvements, FF&E, and IT expenses. FDIC’s
                                                                                   0
      median psf cost was $27 for the 32 field offices                                  Under   $20-$24    $25-$29     $30-$34    $35-$39 Over $40
      improved during 2000.                                                              $20
                                                                                                          Annual Sq Ft Cost

Cost Per Employee
This metric is more appropriate for evaluating FF&E
and IT costs. Again, we are presenting two                                             Figure 8: Cost Per Employee
calculations for this metric:                                                              (Lease, IT Expenses)

  n   FDIC’s median cost-per-employee for all 91 field                        50
      offices was $6,982 considering lease and IT
      expenses. Figure 8 presents cost per employee                           40
      information for FDIC field offices.                                                          35           33
                                                                              30
                                                              Offices




  n   FDIC’s median cost-per-employee for the 32
      field offices improved during 2000 was $9,070
      including lease, improvements, FF&E, and IT                             20
      expenses.                                                                                                                  10
                                                                                        10
                                                                              10
                                                                                                                                              3

                                                                               0
                                                                                   Under $5K     $5-$7K       $7-$9K       $9-$11K        Over $11K

                                                                                                Annual Cost Per Employee




                                                        11
Field Office Space Utilization

A common measure of facility space design efficiency                                    Figure 9: Space Utilization Rate
is the utilization rate, or UR. Specifically, the UR is
the ratio of rentable square feet (rsf) to the number of                          350
employees housed. We found that FDIC’s median
                                                                                                                      306
                                                                                  300
UR was higher than OCC’s median rate and other
government sector averages.1 Figure 9 presents UR                                         230
                                                                                  250
information from the following sources:                                                                       207




                                                                 Rentable Sq Ft
                                                                                  200                  168
  n     The General Services Administration’s (GSA),                                            163
        November 1999, Workplace Evaluation Study                                 150
        Introducing the Cost Per Person Model, which
        established an appropriate U.S. Government                                100
        average for space use of 230 rsf per person.
                                                                                   50

  n     Survey responses from state banking                                        0
        agencies which resulted in a median UR of                                        US State     OTS    OCC FDIC
        163. We received responses from 7 of the 25
        agencies that we surveyed.
                                                                                        Gov't

                                                                 We identified possible reasons for UR differences
  n     Analysis of current field office lease and
                                                                 between FDIC and OCC, such as:
        staffing information from OTS which resulted
        in a median UR of 168 rsf. OTS data included               n   OCC field examiners are currently assigned
        regional and field office information.                         to workstations at a 2:1 ratio.
                                                                   n   OCC field offices have conference rooms
  n     Analysis of current field office lease and                     but do not have separate training rooms.
        staffing information from OCC which resulted               n   OCC uses millwork workstations (desks
        in a median UR of 207 rsf, and                                 built into the wall) instead of cubicles.
                                                                              n     OCC field examiners are not unionized, so
  n     Analysis of current FDIC field office lease and                             OCC management can unilaterally specify
        staffing information, which yielded a median                                space design.
        UR of 306 rsf.
                                                                 OCC also houses some employees permanently at
During our review, a DOA contractor was performing               about 30 of its larger supervised institutions. We
a facilities benchmarking study of HQ and regional               did not include these employees in any of the
FDIC offices. That study identified median URs of                calculations presented in this report.
383 rsf and 438 rsf for HQ and regional facilities,
respectively. An ACSB representative indicated that              FDIC officials cautioned us to benchmark only
special purpose space, such as training centers, and             against facilities comparable to FDIC field offices.
conference rooms increases the URs at HQ and                     For example, the GSA average likely includes
regional facilities.                                             larger facilities such as headquarters as well as
                                                                 regional and field locations. However, in our
OCC Field Office Utilization                                     opinion, the comparison to OCC and OTS is a
                                                                 reasonable one. Further, the intent of this analysis
OCC has 69 field offices in six districts. Field Offices
                                                                 is to provide FDIC with a baseline for space
are used solely to house and support examination
                                                                 utilization and a general sense of how the
staff. FDIC’s median UR was about 48 percent
                                                                 Corporation’s utilization of facilities space
higher than OCC’s median UR.
                                                                 compares to other government agencies.
 1 Median   figures were not available for the GSA study.

                                                            12
Individual Field Office Space Utilization

We next analyzed URs of individual offices. We
found that 90 percent of FDIC’s field offices had URs                          Figure 10: FDIC UR Analysis
exceeding OCC’s median UR of 207 rsf, as shown in                                                     38
                                                                      40
Figure 10. Figure 11 presents a similar analysis of                              OCC Median
OCC individual office URs.                                            35
                                                                                          30
FDIC URs ranged from a low of 147 rsf for the San                     30
Francisco field office--a building that FDIC owns-- to a
                                                                      25
high of 544 rsf for the Richmond, VA field office.
Other FDIC field offices with high URs included:




                                                            Offices
                                                                      20
  n     Scott Depot, WV -- UR of 498 rsf
  n    Montgomery, AL -- UR of 487 rsf                                15                                           13
  n    Hopkinsville, KY -- UR of 462 rsf                              10       8

Offices with low URs that had already been improved                   5
                                                                                                                               1
to FDIC field office design guide standards included:
                                                                      0
   n   Orange County, CA -- UR of 196 rsf                                  100-199     200-299      300-399     400-499    Over 500

   n   Phoenix, AZ -- UR of 192 rsf                                                    Rentable Square Feet Per Employee

  n    LA West, CA -- UR of 188 rsf

An ACSB representative noted that leasing decisions
                                                                               Figure 11: OCC UR Analysis
are limited by the availability of vacant space and                   35
sometimes leasing specialists must select from                                                   FDIC Median
                                                                              31         30
blocks of space in excess of FDIC’s needs. Likewise,                  30
the best value could be a larger property with a lower
cost per square foot.                                                 25

Quantification of Excess Space                                        20
                                                            Offices




We attempted to quantify the annual cost of FDIC
field office space in excess of OCC’s median UR. For                  15
example, in Indianapolis, FDIC leases 12,000 rsf for
40 Core VI staff at $15.06 per rsf . We determined                    10
                                                                                                       7
excess space costs using the following calculation:
                                                                      5
                                                                                                                    1
  (Rsf -(Staff x OCC Median UR)) x Lease Rate, or
                                                                      0
  (12,000 - (40 x 207) x $15.06 = $56,023                                  Under 200   200-299      300-399     400-499    Over 500
                                                                                       Rentable Square Feet Per Employee

We performed a similar calculation for each of FDIC’s
                                                                      We are not suggesting that FDIC could save this
field offices and concluded that the value of FDIC
                                                                      amount or that FDIC should adopt OCC’s UR as
leased space in excess of OCC’s median UR was
                                                                      a goal. Instead, we are presenting this
about $3.6 million annually.
                                                                      information as a baseline for management’s
                                                                      consideration and use in evaluating future leased
Representatives from ACSB noted that DOS and                          space inventory levels.
DCA establish the requirement for field office space
and space requirements sometimes change as the
result of operational or mission-related needs.
                                                           13
Space Utilization Trends
                                                                                           Figure 12: Leased Space Increases
FDIC’s amount of field office leased space has
increased dramatically since 1997. We compared                                    25                                         24
leased space amounts between current and prior field
office leases and identified a median increase of 146                                                                                           19
                                                                                  20
percent between the prior and current amount of field
office space leased.                                                                                                                    15
                                                                                  15
                                                                                                                   12




                                                              Offices
As shown in Figure 12, of the 82 field offices for which
we were able to obtain sufficient prior lease information,                        10
                                                                                                         8
70 percent (or 58 field offices) experienced leased
space increases greater than 100 percent. Five offices                             5          4
experienced lease space increases greater than 300
percent, including Columbia, SC; Columbus, OH;
Indianapolis, IN, Shelby, AL; and Richmond, VA. A                                  0
                                                                                              No       1-49%      50-99% 100-149% 150-199%    Over
regional leasing specialist noted that three field offices                                 Increase                                           200%
were closed and consolidated into the Columbus and                                                             Percent Increase
Indianapolis offices which contributed to the percentage
increases in leased space.                                                                              Figure 13: Increase
                                                                                                        Attributable to 1:1
DOA and DOS officials noted that prior field office space
was probably not sufficient and that improvements were                              35                       33
warranted. However, these officials indicated that FDIC
may have gone too far in improving field office facilities.                         30

                                                                                    25
Impact of 1:1                                                                                                             18
                                                                                    20
                                                                        Offices




Throughout this evaluation, officials indicated the
decision to provide examiners dedicated cubicles,                                   15
                                                                                                  12
known as 1:1, was the primary cause for increases in
                                                                                    10                                              7           8
leased space. However, based on our analysis, it
appears that 1:1 accounted for about 28 percent of the
                                                                                       5
increase. Other design features and amenities
accounted for the balance of the space increase.                                       0
                                                                                              10-19%      20-29%        30-39%    40-49%     Over 50%


In the early 1990s, FDIC assigned examiners to cubicles                           For example, the Minneapolis office has 27 staff.
at a ratio of 2:1 (2 examiners to 1 cubicle). In March                            The amount of the increase attributable to 1:1
1999, FDIC and NTEU negotiated a field agreement for                              would be: (((27/2) x 64) x 1.33) x 1.15 = 1,321.
DOS and DCA employees which required the                                          The current Minneapolis lease increased space by
Corporation to provide dedicated 64 square foot cubicles                          4,782 sq. ft. compared to the prior lease.
to all field examiners. FDIC, in turn, updated its                                Accordingly, the amount attributable to 1:1
Facilities Design Guide, to reflect 1:1 and other field                           accounted for 28 percent of the increase.
office design features.

                                                                                  A regional leasing specialist noted some field
For offices with space increases, we calculated the                               offices were previously at a 3:1 examiner to cubicle
increase attributable to 1:1 using Core VI staffing, the 64                       ratio. In those cases, the calculation discussed
square foot workstation requirement, and FDIC’s                                   above would distort the percentage increase
standard 33 percent circulation factor and 15 percent                             attributable to 1:1.
loss ratio. Figure 13 presents the results of our analysis.


                                                                 14
Field Office Space Design

As discussed earlier, the bulk of the increase
                                                             Figure 14: Field Office Composition
in field office space was attributable to design
features such as training and conference                         DIRM
rooms. Circular 3010.2, FDIC Facilities                           10%
                                                                                                Examiner Work
Design Guide, dated September 28, 1998,                                                            Stations
provided basic design and planning criteria for     Conference
                                                                                                    43%
                                                      Room
existing and prospective FDIC facilities.
                                                       5%
Figures 14 and 15 present the composition
and design of a typical field office.

DOA was updating its design guide during our
review. We understand the revised guide will
combine the training and conference room           Training Room
into a multi-purpose room. Further, DOA has             20%                                    Other
removed the DIRM requirements from the                                                          4%
design guide. Instead of having a standard                                        Supervisor
                                                                   File Room
design for IT purposes, DOA and DIRM will                                          Offices
                                                                       8%
determine IT needs on a case-by-case basis.                                         10%




         Figure 15: Facilities Design for a Typical FDIC Field Office




         Source: FDIC Facilities Design Guide
                                                   15
Space Design: Training Room and Other Design
Issues
Training rooms represented the second largest                         Figure 16: Analysis of Training Rooms
occupier of office space. For FDIC field offices,
training rooms account for 13 percent of total space.
FDIC spends about $1.6 million annually on field office               Training Space                     Sq Ft/Cost
training rooms. The design guide indicates that                       Median Size                         918 sq. ft.
training room size should be based on 25 square feet                  Median Annual Cost                   $15,000
per person. However, in practice we noted that leasing                Median % of                         13 percent
specialists used a factor of 30 square feet per person.               Total Space
                                                                      Total Field Office                90,700 sq. ft.
We received mixed anecdotal comments regarding the                    Training Space
extent of training room usage. In some cases, FOSs                    Total Annual Cost                  $1.6 million
indicated training rooms are used monthly for examiner                Note: Based on 30 Sq Ft. Per Employee
staff meetings, by other regulators for their own training
sessions, and for FDIC local diversity events such as
presentations. In other cases, FOSs indicated training             Figure 17: Conference Room Rates in
rooms were used once every couple of months.
                                                                   Selected Cities (25-person conference room)
                                                                                                        Annual Room Cost
We reviewed field office prototypes for OCC field
offices and noted that OCC does not have training                                      Room Cost     One Use Per Three Uses
rooms at the field office level.                                           City         Per Day        Month     Per Month
                                                                  Columbia, SC               $600         $7,200    $21,600
Alternatives to Training Rooms                                    Raleigh, NC                $250         $3,000     $9,000
                                                                  Indianapolis, IN           $450         $5,400    $16,200
Several managers discussed the possibility of renting
                                                                  Austin, TX                 $500         $6,000    $18,000
hotel conference rooms when needed, in lieu of
                                                                  Denver, CO                 $350         $4,200    $12,600
maintaining training rooms at field offices. We
                                                                  Springfield, MO            $300         $3,600    $10,800
performed limited research in this area. Figure 17
                                                                  Little Rock, AK            $250         $3,000     $9,000
presents conference room rates at selected cities
                                                                  Nashville, TN              $280         $3,360    $10,080
where FDIC has a field office presence. These costs
                                                                  Harrisburg, PA             $250         $3,000     $9,000
do not include (1) seasonal rate variation or costs for
                                                                  Salt Lake City, UT         $500         $6,000    $18,000
audio visual equipment rentals or (2) other costs, such
                                                                  Baltimore, MD              $350         $4,200    $12,600
as conference scheduling and employee mileage
reimbursement costs.
                                                                  Median                      $350        $4,200    $12,600

Other Design Comments
HQ, regional, and field staff we interviewed mentioned                  minimize DIRM space in future office build-out
the following additional space design comments:                         projects. With respect to FOR offices, a DIRM
                                                                        representative suggested that FORs spend
                                                                        more time in resident and non-resident offices
  n   DIRM space is too excessive. Currently, field                     than examiners who have dedicated space.
      offices have 400-450 square feet for DIRM,
      consisting of a server room, storage room, and
      private office for the FOR. The FOR also has a              n     DCA maintains a private office for the FOS in
      dedicated cubicle at those field offices for which                its satellite offices, even though the FOS is
      he/she is responsible. DIRM acknowledged its                      permanently stationed elsewhere.
      field space design is no longer appropriate and
      noted that DIRM and ACSB have met to discuss                n     FDIC maintains a private office for NTEU
      space design efficiency and are taking steps to                   chapter presidents under the terms of the
                                                                        DOS/DCA Field Agreement.

                                                             16
Field Office Usage Levels

In conjunction with FDIC’s telework program, we                      We also analyzed SHARP data to determine the
understand that the Corporation will periodically review             types of activities that examiners perform in field
usage levels of corporate facilities to identify                     offices. Figure 19 presents the results of this
opportunities for reducing facilities space needs.                   analysis.

We reviewed 2000 data from SHARP to identify the
amount of time that examiners spend in field offices
                                                                                  Figure 18: DOS/DCA Examiner Usage
and the types of activities that examiners perform in
                                                                             40
field offices. We did not assess the reliability of data
within SHARP. The intent of this analysis was to
                                                                                                                35
                                                                             35
develop a baseline the Corporation could use going
forward to assess changes in facility usage.                                 30

                                                                             25
We concluded that DOS and DCA examiners spent a                                                        20                 20

                                                                   Offices
median of 33 percent of their time in FDIC field offices                     20
during 2000. Specifically, DOS examiners spent 32
percent of their time in FDIC field offices and DCA                          15
examiners spent 35 percent of their time in field offices.
                                                                             10                                                     8
                                                                                              6
Individual field office usage levels are presented in                        5
Figure 18, and ranged from:
                                                                                     2
  n    Grand Forks - 46 percent                                              0
                                                                                  15-20%    21-25%   26-30%   31-35%   36-40% Over 40%
  n    Madison - 42 percent
  n    Boston-North - 20 percent                                                            Percent of Time in Field Office
  n    NYC-East-19 percent

     Figure 19: Examiner Activities Performed in Field Offices



                      DOS Examiners                                                        DCA Examiners
                                                                         Personnel
                                                                       Management                               Pre-Exam
             Other
                                               Exam-Prep                    9%                                     15%
             26%
                                                 29%          Report Prep
                                                                 20%
                                                                                                                          Supervison
                                                                                                                          Case Mgmt
                                                                                                                             17%



      Training
                                                                  CRA
        9%
                                                Exam-Mgmt          4%
                                                                                                                          FDIC
                                                   10%                                                                   Meetings
                                                                                                                           4%
                     Admin              Exam-Loans
                                                                                    Other                            Training
                      19%                  7%
                                                                                    27%                                4%




                                                             17
Telework

Over the past several years, telework programs               We also interviewed an ACSB representative who
have become more commonplace in the federal                  told us FDIC could only achieve space savings
government. In October 2000, Congress passed                 through teleworking by: (1) reverting to a 2:1
legislation requiring agencies to make telework              examiner to cubicle ratio where examiners share
available to all federal employees over the next             cubicles or (2) making home-based telework
several years. In January 2001, the Department of            mandatory for specific employees. The
Labor estimated the number of full- or part-time             representative noted that workstations account for
teleworkers in the U.S. at 13 to 19 million.                 about one-third of field office space and thus
                                                             telework space reductions would only impact a
                                                             portion of total field office space.
FDIC’s Telework Programs
                                                             Based on our research and discussions with ACSB
In May 2001, the Corporation issued Circular                 and PSB representatives, we concluded that
2121.1, Nationwide Task-Based Telework Pilot
                                                             FDIC would only achieve measurable space
Program, which made task-based telework available            reductions through the telework program by
to all FDIC employees. FDIC also issued Circular             requiring examiners to share workstations.
2121.2, Home-Based Telework Pilot Program.
FDIC limited the home-based program to DCA field
examiners stationed at satellite offices.
                                                             Challenges to Telework
According to the circulars, FDIC offered the telework
programs to enhance employee flexibility and to              Beyond the more obvious challenges of logistics and
improve employee work/life balance. However,                 managing remote workers, there are mission-related
FDIC also implemented telework programs for                  and technical issues that FDIC will need to address
stewardship reasons. A Labor Employee Relations              to make telework a success in the field. DOS
Specialist informed us that the FDIC’s proposal to           managers that we spoke with indicated that DOS’
the NTEU included language allowing FDIC to                  team approach to conducting examinations would
monitor future field space usage and to evaluate             pose the greatest challenge to telework. DCA
future space needs depending on the level of                 managers were more positive about the program
interest and participation in the telework programs.         and indicated their examination approach, which
                                                             utilizes one to two examiners per team would be
                                                             more suited to telework than DOS.
FDIC has established two Key Results Areas
(KRAs) for evaluating the success of its telework
programs. One KRA--Stewardship--focuses on                   As for technical issues, a DIRM representative
productivity and costs. We asked FDIC’s Personnel            informed us that examiners would have difficulties
Services Branch (PSB) to comment on whether the              accessing certain systems, such as DOS’s General
telework programs would result in facilities space           Examination System (GENESYS) over residential
reduction. A PSB representative responded that at            telephone lines. Finally, in our view, DIRM will have
this point it was too early to gauge the impact that         to address information security issues associated
telework might have on facilities space                      with accessing and transmitting sensitive
requirements.                                                information over public telephone lines.


We researched the Internet for examples of telework
programs with cost savings, especially for those
programs that resulted in space reductions. In a
number of cases, the telework program was coupled
with some other alternative “desk-sharing”
approach, such as hoteling or free-addressing.

                                                        18
Corporation Comments

We provided the Corporation a draft of this report,
dated July 19, 2001. Because this report did not
contain recommendations, FDIC was not required to
provide formal written comments. We received
comments from DCA and DOA. The Office of the
Chief Financial Officer, DOS, and DIRM each
responded that they had no comments on the draft
report. Where appropriate, we added text to the
final report to incorporate DCA and DOA’s
comments.




                                                      19
Appendix I: Map of FDIC Field
Office Locations




  Legend:
  ˜   Regional Office

  hField Office




                        20
Appendix II: Glossary

Class A Space - Prime office space.                           KRA - Key Results Area, used to evaluate the success of
                                                              a process or program.
Central Business District (CBD) -The downtown
section of a city, generally consisting of retail, office,    Loss Ratio - The amount of floor space taken by support
hotel, entertainment, and governmental land uses with         structures, elevator lobbies, etc., compared to the total
some high density housing.                                    floor space. FDIC uses a factor of 15 percent of useable
                                                              square feet.
Circulation Factor - Interior space required for internal
office circulation, such as hallways. FDIC uses a factor      OneNet - DIRM initiative to consolidate voice and data
of 33 percent of useable square feet.                         networks into a single network. OneNet brings full
                                                              capability voice, data access, and Internet services
Core VI - The staffing required to handle the projected       together into a single seamless communications
                                                              environment.
workload in each division/office for a five-year period,
2000-2004.
                                                              Router - Hardware definition - The central switching
Free Addressing - Multiple offices or workspaces              offices of the Internet and internal networks. It is an
                                                              interface between two networks.
shared by individuals on a first-come, first served basis.

                                                              Server - Hardware definition - A shared computer on the
Hoteling - Work space that is reserved on a first-call
basis and not dedicated to any specific worker beyond a       Local Area Network used to handle user tasks, such as
                                                              print requests, store data, etc...
specified time. Most typically, a small staff will handle
reservations, reprogram telephones and prepare the
reserved space for occupancy. Hoteling can also include       VoIP - (Voice Over Internet Protocol) - The technology
teaming and conference facilities.                            used to transmit voice conversations over a data network
                                                              using the Internet Protocol.




                                                             21

				
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